The scheme was perfect. Broker Vladimir Eydelman of Oppenheimer & Co. would place the trades; law school graduate Steven Metro, a clerk at Simpson Thatcher, would misappropriate the inside information; mortgage broker Frank Tamayo, a law school class mate of Mr. Metro would be the go-between – information source Metro would not meet with trader Eydelman.
The scheme was profitable. Beginning in February 2009 the ring traded on inside information 13 times, garnering $5.6 million in illicit insider trading profits. The scheme involved a series of steps:
- Mr. Metro accessed the law firm’s computer system to identify possible corporate transactions. Once the information was obtained he would ask Mr. Tamayo to meet in person.
- Messrs. Metro and Tamayo typically met at a New York City coffee shop. Mr. Metro would show his friend his cell phone screen on which he displayed the names and/or ticker symbols of the two companies involved and then point to the name of the acquirer. The approximate price and the announcement date were also conveyed.
- Messrs. Eydelman and Tamayo would meet later near the information booth in Grand Central Station. There Mr. Tamayo would walk up to the broker, show him a post-it or napkin with the name of the company written on it and then either chew the paper up or eat it.
- Mr. Eydelman returned to his office and researched the company. Reports with a recommendation would be transmitted to Mr. Tamayo. The stock would be purchased.
The schemers got caught. Despite the precautions the scheme unraveled into civil and criminal insider trading charges. See, e.g., SEC v. Eydelman (D.N.J. Filed March 19, 2014); SEC v. Tamayon (D. N. J. Filed September 19, 2014).
Mr. Eydelman settled with the Commission. He consented to the entry of a permanent injunction prohibiting future violations of Securities Act Section 17(a) and Exchange Act Sections 10(b) and 14(e). In addition, he agreed to disgorge $1,236,657 in trading profits which will be deemed satisfied by the entry of orders of forfeiture or restitution in the parallel criminal case. In that action Mr. Eydelman pleaded guilty. He also agreed to pay a civil penalty equal to the trading profits and prejudgment interest. See Lit. Rel. No. 23391 (October 23, 2015).